Thor Industries (THO) Beats Q3 Earnings & Revenue Estimates

Thor Industries Inc. (NYSE:THO) reported third-quarter fiscal 2017 (ended Apr 30, 2017) earnings of $2.11 per share, surpassing the Zacks Consensus Estimate of $1.87. Net income from continuing operations increased 41.6% to $111.3 million from $79.2 million in the prior-year quarter.

Revenues rose 56.9% year over year to third quarter record of $2.02 billion and also outperformed the Zacks Consensus Estimate of $1.96 billion. The year-over-year improvement was driven by a combination of organic growth in both towable and motorized RVs, as well as the inclusion of results from Jayco, acquired on Jun 30, 2016.

Gross profit increased 45.5% to $293.8 million from $201.9 million in third-quarter fiscal 2016. The gross profit margin was 14.6% compared with 15.7% in the year-ago quarter due to acquisition-related dilution and market-driven changes in product mix.

Segment Results

Sales of Towable RVs went up 52.6% year over year to $1.43 billion. The increase was primarily due to Jayco’s sales contribution of $362.9 million, along with a strong demand for the company’s travel trailers. Pre-tax income increased 38.8% to $134.5 million from the prior-year quarter’s $96.9 million, backed by higher sales and slight improvement in SG&A expense margin. This was partly offset by increased amortization expenses, lower gross margins related to Jayco, product mix changes and labor costs.

Revenues from Motorized RVs surged 78.7% to $549.9 million from $307.6 million in the year-ago quarter. This upside was driven by robust growth in Class A and Class C motorhomes, along with benefits from Jayco’s acquisition. Pre-tax income from the segment surged 54.9% to $37.4 million from $24.1 million, a year ago.

Financial Position

Thor Industries had cash and cash equivalents of $189.4 million as of Apr 30, 2017, down from $247.3 million as of Apr 30, 2016. Long-term debt was $295 million as of Apr 30, 2017, compared with no long-term debt recorded in the prior-year quarter.

Thor Industries’ operating cash inflow increased 26.2% to $189.4 million in the first nine months of fiscal 2017. Out of the total inflow, $30 million was used for the repayment of principal payments on the revolving credit facility.

The company incurred capital expenditures of $28.5 million in third-quarter fiscal 2017, thus bringing the year-to-date investment to $79.5 million. Total capital expenditure in fiscal 2017 is projected to be approximately $130 million, due to an investment of roughly $50 million in additional capital projects during fourth quarter, to meet product demands.

Zacks Rank & Stocks to Consider

Thor Industries currently carries a Zacks Rank #3 (Hold).

Better-ranked companies in the auto space include Allison Transmission Holdings, Inc. (NYSE:ALSN) , Dana Incorporated (NYSE:DAN) and Ferrari N.V. (NYSE:RACE) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Allison Transmission has an expected long-term growth rate of 11%.

Dana has an expected long-term growth rate of 3%.

Ferrari has an expected long-term growth rate of 14.1%.

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